- EUR/USD breaks the 1,1500 support while US President Donald Trump demands the “unconditional surrender” of Iran.
- Trump has reiterated that Iran should “make a deal now” to avoid total destruction.
- The US dollar bounces as the dollar benefits from its appeal as a safe refuge.
The EUR/USD fell below the key level of 1,1500 on Monday, retreating from the recent maximums as geopolitical risks promoted the demand of the US dollar.
At the time of writing, the EUR/USD is quoted about 1,1481, with intradic losses close to 0.70%
The movement followed the comments of the US president Donald Trump, who requested the “unconditional surrender” of Iran on Tuesday and warned Tehran to dismantle his nuclear program or face increasing consequences.
Praising Israeli air attacks as “excellent” and “very successful,” warned that future operations could be “even more brutal” and urged Tehran to “make a deal now” or face a total defeat.
Speaking previously aboard the Air Force One after leaving the G7 summit, Trump made it clear that he did not look for a high fire, but a “real end” to Iran’s nuclear ambitions, saying: “They should have made the deal … I am not very willing to negotiate.”
Earlier in the day, he asked civilians to “immediately evacuate Tehran,” stating that US forces and Israelis now had “total and complete control of the heavens over Iran.” In a statement before dawn, Trump revealed that the US knows where Iran’s supreme leader hides, but “he will not eliminate it – at least not for now.”
The day had begun with a softer tone, since Trump expressed his hope that “Israel and Iran can reach an agreement,” although he added that “sometimes countries have to fight first.”
He also urged civilians to evacuate Tehran, pointing out the possibility of greater military action. These comments shook the markets and encouraged risk aversion flows, which led the operators to favor the dollar and weigh on the euro despite the support data of the Eurozone.
FAQS risk feeling
In the world of financial jargon, the two terms “appetite for risk (Risk-on)” and “risk aversion (risk-off)” refers to the level of risk that investors are willing to support during the reference period. In a “Risk-on” market, investors are optimistic about the future and are more willing to buy risk assets. In a “Risk-Off” market, investors begin to “go to the safe” because they are concerned about the future and, therefore, buy less risky assets that are more certain of providing profitability, even if it is relatively modest.
Normally, during periods of “appetite for risk”, stock markets rise, and most raw materials – except gold – are also revalued, since they benefit from positive growth prospects. The currencies of countries that are large exporters of raw materials are strengthened due to the increase in demand, and cryptocurrencies rise. In a market of “risk aversion”, the bonds go up -especially the main bonds of the state -, the gold shines and the refuge currencies such as the Japanese yen, the Swiss Franco and the US dollar benefit.
The Australian dollar (Aud), the Canadian dollar (CAD), the New Zealand dollar (NZD) and the minor currencies, such as the ruble (Rub) and the South African Rand (Tsar), tend to rise in the markets in which there is “appetite for risk.” This is because the economies of these currencies depend largely on exports of raw materials for their growth, and these tend to rise in price during periods of “appetite for risk.” This is because investors foresee a greater demand for raw materials in the future due to the increase in economic activity.
The main currencies that tend to rise during the periods of “risk aversion” are the US dollar (USD), the Japanese yen (JPY) and the Swiss Franco (CHF). The dollar, because it is the world reserve currency and because in times of crisis investors buy American public debt, which is considered safe because it is unlikely that the world’s largest economy between in suspension of payments. The Yen, for the increase in the demand for Japanese state bonds, since a great proportion is in the hands of national investors who probably do not get rid of them, not even in a crisis. The Swiss Franco, because the strict Swiss bank legislation offers investors greater protection of capital.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
